/ 10 June 2010

MTN shares surge after Orascom talks fail

Shares in Africa’s biggest cellphone operator, MTN, rose more than 4% on Thursday after the collapse of talks with Egypt’s Orascom Telecom about a potential acquisition.

MTN shares gained as much as 4,44% to R105,90. By 7.32am GMT, the stock was trading 3,24% higher.

MTN and Orascom Telecom said in separate statements on Wednesday that talks had been called off, sinking a deal that could have created the world’s third-largest mobile operator.

Shareholders of MTN have again been let down after the South Africa-based group failed to do a deal four times in the last three years, Frost & Sullivan analyst Lindsey McDonald said.

“What is clear, though, is that there can be little doubt that MTN shareholders are growing impatient and there is now likely to be a great deal of pressure on the group’s executive management to deliver new growth streams and revenues,” Mc Donald said.

Africa’s top cellphone operator began talks in late April about acquiring Orascom or some of its assets. The deal was complicated by Algeria’s government, which wants to buy Orascom’s unit in that country.

Without the cash-generating Algerian unit, Djezzy, the deal would have little meaning for MTN, which is desperate to expand and needs a foothold in North Africa.

McDonald said there were still some investment opportunities for MTN in Africa.

“It is now up to management to decide whether they are going to follow their traditional approach of acquiring an entire group, or if they would consider the purchase of a telecoms company operating in a single market.” — Reuters